August 01, 2001 --- Vol. 7, No. 92August 2001

State issues conditional approval on Point Thomson expansion

The state Division of Oil and Gas and the major working interest owners at the Point Thomson unit (ExxonMobil, BP and Chevron) have reportedly come to an agreement regarding an application by unit operator Exxon to simultaneously expand and contract the eastern North Slope unit which abuts the coastal plain of the Arctic National Wildlife Refuge.

The state issued a conditional agreement July 31 (released today) that calls for sustained commercial production from the unit by 2008. It says Point Thomson development drilling is to begin no later than June 15, 2006, and calls for the completion of seven development wells by June 15, 2008.

The agreement, which has to be signed by all working interest owners by Aug. 15, also calls for completion of a well through the Thomson Sand interval by June 15, 2003. Under the agreement, four leases were contracted out of the Point Thomson unit – all of ADL 47565 and portions of ADL 28384, 28385 and 343109. Seven expansion areas and one work commitment area, involving all or portions of 16 leases currently outside the unit, are to be included in the Point Thomson unit.

Expansion lease areas were identified as “#1 Challenge Island, #2 North of PTU, #3 East of PTU, #4 Sourdough Prospect, #5 Lynx Prospect, #6 North of #1 and #2, #7 BS2000 Lease,” which is ADL 389716 (issued in the state’s 2000 areawide lease sale).

The work commitment area, Red Dog, includes all of leases ADL 377012 and 377013, and portions of ADL 377016.

Participating areas have to be formed for all expansion areas by June 15, 2008, except for expansion areas 4 and 5 (Sourdough and Lynx). Those PAs have to be formed by June 15, 2010.

The state said, “There is a high probability that the expansion areas contain hydrocarbon resources, while the work commitment area may or may not be underlain by oil and gas reserves.” The state did not ask for specific drilling commitments for each expansion area.

If the working interest owners fail to “timely explore or bring the expansion areas into production,” the agreement pulls the expansion areas out of the unit. Applicants then have to pay the state for the “lost opportunity to release the expansion acreage,” Mark Myers, director of the division, said in a July 31 letter to unit operator Exxon.

Royalty rates were raised in five of the seven expansion areas.

Editor’s note: For more information see the August issue of Petroleum News Alaska, which will be published in late August.

Comment period starts today for TAPS renewal

Today the Bureau of Land Management Joint Pipeline Office kicked off the start of a 60-day scoping period for preparation of the Environmental Impact Statement for renewal of the right of way for the Trans-Alaska Pipeline System.

The public can provide information and comments on specific issues they believe should be addressed in the EIS through Sept. 29.

Comments are being taken by letter, email, fax, world wide web, phone voice message, and later in September, at six public meetings in pipeline corridor communities.

On May 2, an application was filed with the state and federal governments by an owners group representing all of the TAPS owners, asking for right of way renewal before the current lease and grant expire in 2004.

Current plans call for a draft EIS to be published in July 2002 and a final EIS in November 2002.

Argonne National Lab is assisting BLM-JPO with the EIS.

More details can be found at the new state-federal TAPS renewal website at:

DOE selects BP Exploration (Alaska) to head carbon dioxide project

BP Exploration (Alaska) Inc, was selected by the U.S. Department of Energy to head one of eight new exploratory projects to study ways to capture and store carbon gases.

The eight projects emerged from a nationwide competition that garnered 62 proposals from private companies, universities, local governments and environmental organizations.

BP will head a seven-member international team to “demonstrate the feasibility of capturing carbon dioxide from a variety of fuel types and combustion sources and storing it in unmineable coal seams and saline aquifers,” DOE said in a statement.

The other winning proposals came from Alstom Power, Praxair, Consol, Dakota Gasification, Advanced Resources International, The Nature Conservancy and Yolo County, Calif.

DOE said that each project offers an approach to “carbon sequestration,” a “promising class of technologies that remove global warming gases from the exhausts of power plants or from the atmosphere itself, and securely store them.”

Total estimated cost of the BP project will be $8.8 million, $5 million of which DOE will fund.

ANWR bill up for full House vote

The strategic energy bill that passed the House Resources Committee July 17 and includes provisions to open the Arctic National Wildlife Refuge for exploration will go to the House floor today. A vote on H.R. 4 is expected by the end of the day.

An amendment to substitute a Democratic version of the energy bill will be made, according to Arctic Power. Several anticipated amendments are likely to pass, including one to limit the footprint of development to 2,000 acres, and one to use further revenues for conservation measures.

Passage of the bill by a healthy margin with bipartisan support is likely, and such passage will send a pro-ANWR message to the Senate, Roger Herrera of Arctic Power told PNA.

Foothills says 1977 treaty gives priority to highway pipeline

An “over-the-top” gas pipeline has no chance of getting political and environmental approval, said John Ellwood, vice-president of Foothills Pipe Lines, the lead proponent of the Alaska Highway project.

But he told Canada's National Post newspaper that Foothills endorses two separate pipelines from the North Slope and Mackenzie Delta as the most economic means of getting Arctic gas from the United States and Canada to Lower 48 markets.

Ellwood said the “correct” choice is to stick with the 1977 Canada-U.S. treaty and legislation, which laid the political groundwork for an Alaska Highway right of way.

“The treaty and the legislation of both countries are a reality,” he said. “Our view would be that that gives us a priority right to move Alaska gas to market. … We've invested a great amount of time and effort in developing (that pipeline option) and it would require an act of Congress and an act of Parliament and a re-negotiation of that treaty to do anything different. That would take away from us the rights we have and we would vigorously oppose it.”

Ellwood said a stand-alone Mackenzie Valley pipeline is more environmentally sound and politically acceptable. He suggested the two pipelines would cost the same as an “over-the-top” link carrying North Slope and Delta gas in a single pipeline.

Larry Bagnell, the member of Parliament from the Yukon, who represents the governing Liberal Party, said the building tensions between the Yukon and the Northwest Territories are unnecessary because there is sufficient demand and capital to finance two pipelines -- regardless of recent comments by Prime Minister Jean Chretien that only one project is affordable.

He said a route across the Beaufort would be a technical nightmare and subject to too many environmental obstacles.

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